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DECISION No. 211/2004/QD-TTg OF DECEMBER 14, 2004 APPROVING ORIENTATIONS FOR VIETNAM’S FINANCIAL DEVELOPMENT TILL 2010

THE PRIME MINISTER

Pursuant to the December 25, 2001 Law on Organization of the Government;

On the basis of the conclusions of the Political Bureau in Notice No. 147-TB/TW of July 16, 2004 of the Party Central Committee on the scheme on Vietnam’s financial strategy till 2010;

At the proposal of the Finance Minister in Report No. 51 TTr/BTC of September 21, 2004,

DECIDES:

Article 1.- To approve the orientations for Vietnam’s financial development till 2010 with the following major contents:

A. Overall objectives:

To ensure strong enough national financial potentials for actively promoting economic growth in a rapid, efficient and sustainable manner, being able to control inflation, stabilize the currency, prices and market; adopt a system of policies on financial mobilization and distribution with high effect, ensuring equity, dynamism, compliance with the socialist-oriented economic market institutions, and having the effect of opening up the outlet for domestic resources, attracting external resources and efficiently using all resources for national socio-economic development; build a sound, public, transparent and democratic national finance under strict management and audit, making finance to be an efficiency measure of all economic activities and an impetus for boosting socio-economic development; enhance and renew the capability and effect of State management over finance by stepping up administrative reforms, modernizing financial tools and raising the quality of financial managers; consolidate and raise Vietnam’s financial status in international relations on the basis of securing national independence, sovereignty and financial security.

B. Specific objectives:

1. To well handle the accumulation-spending and saving-investment relationships, increase the financial potential for socio-economic development investment, and safeguarding of defense and security.

- To increase the percentage of total social investment capital compared to GDP to 36-40% in the 2001-2010 period, in which investments from the State budget will account for around 8%.

- To stabilize the ratio of development investment expenditure (including expenditure with the source of Government bonds) at the level of 29-30% of total State budget expenditure.

2. To raise the percentage of mobilization of GDP for the State budget from 20-21% to 21-22%, in which tax and charge revenues will increase from 19-20% to 20-21%.

3. To increase the levels of expenditure on education and training, science and technology, and culture in total State budget expenditure.

- By 2005, expenditure on education and training and expenditure on science and technology shall reach 18% and 2% of total State budget expenditure respectively;

- By 2010, expenditure on education and training, expenditure on science and technology and expenditure on culture shall reach 20%, 2.1% and 1.8% of total State budget expenditure respectively.

4. To control and maintain the State budget overspending level not exceeding 5% of GDP.

5. To control the country’s government debts and foreign debts at levels not exceeding 50% of GDP.

6. To create synchronously all types of market, including the financial, financial service and real estate markets.

7. To complete the arrangement and renewal of State enterprises, raising their efficiency and competitiveness.

8. To reduce the proportion of cash in total payment instruments, stabilize the purchasing power and value of Vietnam dong, gradually raising its convertibility.

C. Major groups of solutions:

1. To exploit to the utmost financial resources for socio-economic development.

To implement financial mechanisms and policies in a synchronous and uniform manner, creating a stable and attractive macroeconomic environment and promoting enterprises, economic sectors, population of all strata and foreign investors to invest capital in socio-economic development.

To renew and perfect financial policies to attract domestic and foreign resources for further development of socio-economic infrastructure, dynamic regions and key economic regions in order to create a breakthrough in economic restructuring.

To vigorously attract indirect investment capital through the domestic financial market, efficiently use all channels, tools and forms of financial investment; encourage commodity supply and mechanism perfection to promote the development of the securities market into a major channel of capital mobilization for development investment. To perfect financial mechanisms in order to create conditions for localities in the key economic regions to issue bonds according to regulations for investment in building socio-economic infrastructure. To actively mobilize capital on the international financial market by issuing Government bonds, study and experimentally carry out the issuance of corporate bonds on the international financial market.

To rationally mobilize revenues of different sources for the State budget on the basis of reforming the tax and charge system in tune with the market mechanism into an equitable, uniform and rationally and synchronously structured one in all three aspects: tax policy, tax administration and tax consultancy service, ensuring an environment conducive to production and business development, boosting economic growth and increasing enterprises’ accumulations.

To strictly manage and efficiently exploit land resources according to long-term plan. To strongly step up the sale and lease of State-owned property, including sale and lease of the right to commercially operate and use infrastructure (roads, ports, training establishments, services, etc) in order to regenerate investment capital sources for the budget and raise the property use efficiency.

To widely mobilize and attract capital sources in the society in order to increase investment for improving public services qualitatively and quantitatively. To strongly accelerate socialization by applying financial mechanisms appropriate to non-business units. To perfect financial mechanisms to encourage investors to invest their capital in the provision of public services.

2. To rationally distribute and efficiently use financial resources

To perfect mechanisms and policies on rational, thrifty and efficient distribution and use of investment resources of the society, promoting economic restructuring, synchronously developing various economic regions, ensuring adequate financial resources for achieving the objective of economic development in association with social equity, hunger eradication and poverty alleviation.

To enhance the leading role of the State’s financial resources in socio-economic development investment, in which the State budget’s investment capital shall be mostly concentrated on the building and upgrading of socio-economic infrastructure, particularly agricultural and rural infrastructure; ensure capital for key national projects as well as priority strategic objectives and tasks; rationally support development investment in difficulty-hit areas.

To restructure the investment in order to speed up the economic restructuring process, attach special importance and give priority to investment in developing dynamic economic regions and restructuring in agriculture and rural economy; continue implementing the mechanism of encouraging and directing social investment in spearhead, high-tech industries, contributing to promoting technological renovation. To encourage investment in development of services, especially financial, banking, insurance, lottery… services.

To implement financial policies to encourage the development of dynamic economic regions to take the lead in economic growth in close association with creating conditions for development of other regions on the basis of promoting the strengths of each region while paying more attention to investment in difficulty-hit areas.

To take initiative in distributing and using the State budget in an efficient manner, meeting socio-economic development requirements, ensuring defense, security and State management requirements. To continue restructuring the State budget expenditure by clearly defining the expenditure contents and scope to be ensured by the State budget for budget beneficiaries, promote the initiative of localities and units, abolish direct and indirect State budget subsidies, combine the State budget expenditure restructuring with administrative reforms in a way suitable to the State’s functions and tasks, and step up socialization in order to mobilize to the utmost resources for socio-economic development.

To continue perfecting the decentralization mechanism, ensuring not only concentration, unity as well as the leading and coordinating role of the central budget but also strong decentralization coupled with enhanced responsibility and initiative in the budget management of local administration; strive to increase the number of localities that can self-balance their budgets.

3. To renew and develop enterprise finance

To build and perfect enterprise finance policies and mechanisms, ensuring equality, stability, transparency, creating favorable conditions for enterprises of all economic sectors to exploit and make full use of all resources inside and outside enterprises for production and business development and raise their competitiveness on the domestic and world markets.

To perfect financial policies and mechanisms by accelerating the renovation process, combining the reorganization of State enterprises with the enhancement of their financial capability in the forms of equitization, assignment, sale, business contracting, lease, merger, consolidation, dissolution or bankruptcy. To broaden the types of State enterprises to be equitized, including corporations and large-sized enterprises.

To substantially renew policies and mechanisms on financial management of State enterprises by clearly separating the owner’s State management and administration function from the enterprise’s business management function; abolish the mechanism of umbrella agency; clearly define the powers of State agencies in performing the function of owner’s representative towards State enterprises; apply the mechanism whereby the State shall place orders for production and provision of public-utility goods and services.

4. To develop the financial and the financial service markets, meeting the requirement of attracting financial resources for development investment.

To diversify commodities on the financial and financial service markets, increase the quality and quantity of commodities for the securities market by vigorously accelerating the process of equitizing State enterprises, combining the equitization of enterprises with the listing on the securities market. To encourage enterprises of other economic sectors, including foreign-invested enterprises, to list share certificates and mobilize capital via the securities market.

To upgrade Ho Chi Minh City Securities Trading Center into Stock Exchange; to set up Hanoi Securities Trading Center. To prepare conditions for step by step aligning Vietnam’s securities market with the securities markets of the regional countries.

To perfect the legal framework regulating the financial market operation, promoting the association between the monetary market and the capital market in terms of policy making, operation mechanism, operation management and supervision.

5. To expand external financial activities and take initiative in international financial integration in order to consolidate and develop the national finance.

To determine a suitable roadmap for gradual development and liberalization of capital flows in the integration context, diversify capital sources and multilateralize partnership relations. To perfect the foreign debt management. To build a debt monitoring system, a system of criteria for efficiency assessment of projects and programs using foreign loans, especially foreign commercial loans borrowed by enterprises according to the self-borrowing and self-repayment mechanism. To raise efficiency in the use of capital sources of the Fund of Accumulation for Foreign Debt Repayment and organize the payment of debts on time. To increase human resources and improve the capacity in the foreign debt management.

To perfect the legal framework on finance in accordance with international standards for successful integration; adjust and create financial mechanisms and policies in compliance with bilateral and multilateral commitments. To practice protection of domestic production and implement key financial, banking and commercial regulations according to explicit and transparent schedules and roadmaps.

6. To raise the capability and efficiency of financial supervision, ensure sound finance and national financial security.

To establish an early warning system in order to promptly preclude dangers that undermine the financial system security, apply a compulsory regime of financial reporting, practice financial publicity and perfect the State budget expenditure control system. To audit units benefiting from the State budget funds. To perfect and raise the capability and quality of the financial examination and inspection in all domains, particularly the management and use of State budget funds and the management of capital construction investment capital. To reorganize, and raise the capacity of, financial supervision organizations to be placed under the uniform management by the Finance Ministry.

7. To carry out administrative reforms in the financial domain, ensure uninterrupted, quality and efficient financial activities.

To synchronize the system of legal documents and carry out administrative reforms in finance; perfect the functions and tasks of the financial management apparatus and consolidate and strengthen its organization; to set standard criteria for financial personnel, build up a contingent of public employees in the financial sector sufficient in number, rationally structured and highly competent in their professional operations; modernize financial management; apply scientific and technical advances in order to raise financial management capability and efficiency.

D. Specific action programs:

The orientations for financial development till 2010 shall be materialized according to the following specific programs and schemes:

1. The program of tax system reforms till 2010 (to be implemented under the prime responsibility of the Finance Ministry).

2. The program of renewal and perfection of enterprise finance management mechanisms, consisting of the scheme on building of financial mechanisms and policies to speed up the State enterprise reform process; the scheme on building of financial mechanisms for enterprises of all kinds; the scheme on enhancing the financial capability and competitiveness of enterprises and the scheme on building of an enterprise finance supervision system (to be implemented under the prime responsibility of the Finance Ministry).

3. The program of renewal and perfection of public property management mechanisms, consisting of the scheme on building of financial mechanisms and policies for land management, the scheme on renewal of financial management mechanisms and policies for infrastructural assets; the scheme on perfection of mechanisms for management of assets of the State’s administrative and non-business sector; the scheme on establishment of an agency in charge of procurement and auction of public assets of the State’s administrative and non-business sector; the scheme on building and raising of the public asset management capacity (to be implemented under the prime responsibility of the Finance Ministry).

4. The scheme on mobilization, distribution and efficient use of investment capital, consisting of the scheme on formulation of policies on capital mobilization and investment (both at home and abroad) (to be implemented under the prime responsibility of the Finance Ministry in collaboration with the Planning and Investment Ministry).

5. The scheme on implementation of the State Budget Law, including the perfection of the State budget management and creation of State budget management policies and mechanisms; the scheme on renewal of the State budget expenditure structure (to be implemented under the prime responsibility of the Finance Ministry).

6. The scheme on creation of the experimental mechanism whereby the State builds houses and infrastructure for long-term lease by non-public establishments, provides financial, land use transfer… incentives in order to encourage the development of the non-public sector.

7. The scheme on implementation of the 2003-2010 insurance market development strategy (to be implemented under the prime responsibility of the Finance Ministry).

8. The scheme on elaboration of an overall roadmap for development and perfection of the financial market till 2010 (to be implemented under the prime responsibility of the Finance Ministry in collaboration with the concerned ministries).

9. The scheme on renewal of management of the nation’s government debts and foreign debts (to be implemented under the prime responsibility of the Finance Ministry in collaboration with the concerned ministries).

10. The scheme on renewal of customs activities according to the Customs Law (to be implemented under the prime responsibility of the Finance Ministry).

11. The scheme on price management perfection according to the Price Ordinance, including the perfection of price management mechanisms, abolition of the price protection and subsidy mechanism, abolition of the dual price mechanism, formation of goods exchanges, study and creation of a legal framework on anti-dumping and monopoly price control, internal price transfer control; increased application of the auction method (to be implemented under the prime responsibility of the Finance Ministry).

12. The scheme on strengthening and renewal of the financial inspection work (to be implemented under the prime responsibility of the Finance Ministry).

13. The scheme on formulation of equipment criteria and norms for State administrative agencies and administrative public employees (to be implemented under the prime responsibility of the Finance Ministry).

14. The scheme on administrative reform and national finance management capability enhancement, the scheme on renewal of training, scientific research and raising of the capability for public employees in the financial sector (to be implemented under the prime responsibility of the Finance Ministry).

15. The scheme on implementation of the Prime Minister’s Decision on the plan on development and application of informatics and modernization of the financial and budget management technology (to be implemented under the prime responsibility of the Finance Ministry).

Article 2.- Organization of implementation

1. To assign the Finance Ministry to assume the prime responsibility for, and coordinate with the State Bank of Vietnam, the Planning and Investment Ministry, the concerned ministries and branches, and the provincial/municipal People’s Committees in, organizing the materialization of the Orientations for Vietnam’s financial development till 2010.

2. On the basis of the contents of the Orientations for financial development specified in this Decision, the Finance Ministry shall assume the prime responsibility for, and coordinate with the concerned ministries and branches, and the provincial/municipal People’s Committees in, working out and implementing annual and five-year plans of action in line with the national socio-economic development plans of the same period; guiding, examining, supervising and summing up the implementation on an annual basis for reporting to the Prime Minister; organizing the preliminary review of the implementation in 2005 and the final review of the implementation in 2010.

Article 3.- This Decision takes effect 15 days after its publication in the Official Gazette.

Article 4.- The ministers, the heads of the ministerial-level agencies, the heads of the Government-attached agencies, and the presidents of the People’s Committees of the provinces and centrally-run cities shall have to implement this Decision.

Prime Minister
PHAN VAN KHAI